PHL could lose position as top source of nickel; Indonesia resumes exports

Posted on February 20, 2017

THE PHILIPPINES could lose its standing as the world’s top nickel supplier with Indonesia lifting its export ban on the metal, and after the Environment department ordered closures and canceled concessions which affected 28 mines, accounting for half of the country’s total nickel output.

This photo taken on June 16, 2016 shows a barge being loaded with nickel ore at a private port in Infanta town, Pangasinan province, north of Manila. -- AFP
Last month, Indonesia announced that it will allow shipments of excess nickel ore, bauxite and other mineral concentrates by miners that build processing plants, an easing of its blanket export ban on unprocessed ore, in place since 2014.

A Jan. 12 Reuters report, citing an Indonesian mining ministry official, said that Indonesia could export up to 15 million tons of nickel ore this year if the ban is lifted.

As such, the Mines and Geosciences Bureau forecasts that Indonesia will recapture some of its old market share, dislodging the Philippines from its current position in the nickel market.

“Top nickel supplier status is market-driven depending on supply and demand,” Mines and Geosciences Bureau Assistant Director Danilo U. Uykieng said in a text message over the weekend.

“Since Indonesia will now allow exports, it will affect the supply side aggravated by the closure/suspension of Phil. mines,” Mr. Uykieng added.

This concern was also raised by Enrique C. Fernandez, president of Eramen Minerals, Inc. one of the four nickel mines in Zambales which was issued a suspension order at the start of the audit and is now flagged for closure.

“When (Indonesia) come(s) into the market and we hold back, what will happen? The price will go up, Indonesia will take advantage of prices. And where are we?” Mr. Fernandez said in a Friday interview at the Manila Golf Club.

Although the Philippines, geographically the nearest source of nickel to China, the largest importer of the metal, enjoys the advantage of lower freight costs, government should motivate rather than discourage miners to compete with other exporters.

“The government should be encouraging us to be competitive, not holding us back. China will buy from wherever they get the best deal so we have to compete,” Mr. Fernandez added.

Eramen Minerals halted operations in 2014 along with other nickel miners in Sta. Cruz, Zambales after the firm declined to heed the local government’s order for the joint construction of a dedicated mining road after the miners were alleged to have used public roads to deliver their output to ports.

Local residents protested the transport of mine product, claiming their exposure to serious health risks.

However, in the case of Eramen Minerals, Mr. Fernandez said that the company has three mining roads, which it uses exclusively for its operations.

“I already have a road. Why should I build another road? They wanted us to build the road then turn over the ownership to the governor. Then when we give it, and use it, they’ll charge us to use it,” Mr. Fernandez said.

He added that the Environment department is also accusing the company of violating environmental laws for operating in watersheds -- the nearest of which, Mr. Fernandez said, is a five-hour drive from the mine site.

Mr. Fernandez said he plans to operate and compete this year and hopes to be vindicated on appeal to the Office of the President or the courts.

“Until there’s final resolution on that, we will continue operating,” Mr. Fernandez added.

Meanwhile, the country’s number two nickel producer, Global Ferronickel Holdings Inc. (GFNi) expressed concern that the construction of the processing plant agreed by affiliate Ipilan Nickel Corp. with Chinese state-run Baiyin Nonferrous Group Co. Ltd. will not go ahead amid uncertainties stemming from the government’s clampdown against the industry.

“We are worried that it might not because of this one,” GFNi President Dante R. Bravo told reporters last week in Quezon City, when asked of the signed memorandum of cooperation between GFNi and Baiyin last October regarding the construction of a $700 million value-added downstream facility.

“They did not say categorically that they withhold. All I’m saying is there is the possibility for it to be on hold,” Mr. Bravo added.

On Indonesia’s policy shift, Mr. Bravo said that this will “not have much impact” on the company’s operations, and said subsidiary Platinum Group Metals Corp.’s (PGMC) is maintaining its production target of 5 to 6 wet million metric tons (MT) this year.

“(W)e expect the volume will not be that much because the conditions for export are very stringent,” Mr. Bravo said in a separate text message over the weekend.

GFNI’s PGMC, which is under a closure order, accounts for 8.15% of the 24.65 million dry MT of nickel shipped last year.

A BMI Research report released last week projected world nickel prices to average $10,500/ton this year, edging up to $13,500/ton by 2021. Prices fell to $9,647/ton last year from $11,877/ton in 2015.

The report of the Fitch unit added that large nickel miners, having avoided any closures or suspensions and with a better financial footing, should be able to comply with the government’s move to tighten environment regulations, while smaller ones may exit the market.

On Feb. 2, the Environment department ordered the closure of 23 metal mines and the suspension of five others for various environmental violations.

Last week, Environment Secretary Regina Paz L. Lopez also canceled 75 mining permits, or more than three-fifths of the 311 existing mineral production sharing agreements.

The 75 miners, all still in exploration phase, allegedly violated environmental law for planning to operate in watershed areas, posing a risk to the water supply of residents near the mine sites, Ms. Lopez said. -- Janina C. Lim